Banks hit as markets get a coal shock

Bank stocks led the decliners with heavyweights such as State Bank
of India slumping 4.4 per cent and ICICI ending 3.4 per cent lower as
investors interpreted the court ruling as negative.

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Mail Today Bureau

New Delhi

September 26, 2014

UPDATED: September 26, 2014 12:39 IST

Picture for representational purpose

Stocks of banks like SBI and ICICI fell after 214 coal blocks were scrapped.

The BSE and Nifty fell for the third session in a row on Thursday, as banks and power, steel and cement companies remained under pressure a day after the Supreme Court scrapped the allocation of 214 coal blocks by the government since 1993.

The Nifty closed 2.8 per cent lower as the verdict gave rise to fears that loans to the holders of the permits could turn bad and pressure lenders who are already struggling to control nonperforming assets (NPAs) that are eating into their profits.

Overseas investors, who were the backbone of the rally in Indian markets so far this year, sold shares for the second straight day. On Wednesday, the sell-off was worth $130 million, exchange data showed.

"Concerns over the court's verdict are not yet over. Even foreign investors have started cutting exposure, which is a real concern," said Suresh Parmar, head of institutional equities at KJMC Capital Markets.

India was the worst performing market in Asia on Thursday. Most of the Asian markets were higher, while the MSCIAsia Pacific index excluding Japan fell 0.6 per cent.

The BSE closed 1.03 per cent lower at 26,468.36 points, while the Nifty closed down on 1.13 per cent at 7,911.85.

Bank stocks led the decliners with heavyweights such as State Bank of India slumping 4.4 per cent and ICICI ending 3.4 per cent lower as investors interpreted the court ruling as negative.

Coal stocks, too, continued their slump. Jindal Steel and Power fell 7.7 per cent while Hindalco Industries Ltd ended 4.5 per cent lower due to concerns about the future of the coal blocks.

Bhushan Steel, Usha Martin, Monnet Ispat remained under pressure due to the cancellation of 214 mines. "We believe that the coal block cancellation could adversely impact India's nascent economic recovery...The impact will be felt across various channels and lead to a rise in non-performing assets of banking sector, an increase in the cost of coal and in turn a rise in power tariffs...," said India Ratings & Research.

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